Why Banks Aren’t Using Ripple’s xRapid Yet, Explained

Earlier this year, Ripple CEO Brad Garlinghouse promised that “dozens” of banks will use its cryptocurrency product xRapid to power international money exchange in 2019.

So far, however, only four companies are on board. They include money transfer services (Viamericas, Cuallix, and MercuryFX) and a financial firm (Catalyst Corporate Credit Union).

None could be described as a bank.

What Ripple enthusiasts are waiting for are the big names: Santander, American Express, SBI, each of which are using a version of Ripple’s services, but not the cryptocurrency XRP itself.

Banks and xRapid: “Regulatory Framework” is not clear

Ripple’s Global Head of Banking Marjan Delatinne offered an insight into why banks are reluctant to embrace XRP and xRapid:

“No banking institution is using [xRapid]. Regulatory framework around the usage of digital assets is not very clear for banks but payment service providers or other finance institutions are less governed by these obligations.”

Due to regulation uncertainty, NO banking institutions are using xRapid as of now, ONLY payment service providers.

This goes some way to answering the question of why money transfer services are the first to sign up to xRapid. Without clear guidance from governments, central banks, and regulators, banks are unlikely to use XRP or any other digital currency.

This process is likely to drag on as Ripple is still in court over its controversial links with the cryptocurrency XRP. Until the courts and, ultimately, the Securities and Exchange Commission (SEC), confirm whether or not XRP is a security, we are unlikely to see banks integrate the xRapid system.

xRapid Explained

xRapid is a service offered by Ripple that uses the XRP cryptocurrency to speed up cross-border money transfers. It uses XRP as a “bridge currency” when making international exchanges.

xRapid eliminates the need for nostro accounts, whereby banks pre-fund hundreds of international accounts all over the world in order to execute foreign exchanges. Instead, banks would exchange through XRP instantly and on-demand.

In early pilot tests, banks reported 70% savings with transfers taking minutes, rather than days using the old system.

xRapid went live in October 2018, but only four financial companies have officially jumped on board.

New xRapid Exchange Partner: BitStamp

Despite the holdups, Ripple has revealed one major step forward. CEO Brad Garlinghouse announced that BitStamp is now an official xRapid exchange partner. Ripple needs to partner with multiple crypto exchanges around the world as they will ultimately power transfers between XRP and the necessary fiat currency.